Stock ETFs Look To October Jobs Report

Equity exchange traded funds have been pushed around this week by the latest headlines crossing on Europe’s debt crisis.However, the focus will swing to the U.S. economy on Friday morning as markets get the October nonfarm payrolls report. The data will give investors a glimpse of how the economy is progressing after GDP grew at a 2.5% rate in the third quarter. According to a Reuters survey, nonfarm payrolls likely rose by 95,000 in October, compared to the 103,000 gain in September. During a normal economic expansionary period, healthy monthly payroll gains averaged around 150,000, and in the early stages of an economic rebound, gains are expected to surge above 250,000 per month. The payroll data will allow the market and investors to get a sense of the direction the U.S. economy is heading, according to CNBC. “Our monthly review of tax and withholding data from the U.S. Treasury’sComplete Story »

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Deutsche Bank's Joe LaVorgna is the most optimistic toward Friday's jobs report of the 92 economists surveyed by Bloomberg: he predicts 225,000 nonfarm payrolls were created in July, compared with the consensus estimate of 185,000.

WASHINGTON — U.S. job growth grew modestly in January and gains in the prior two months were bigger than initially reported, supporting views the economy’s sluggish recovery was on track despite a surprise contraction in output in the final three months of 2012.
Employers added 157,000 jobs to their payrolls last month, the Labor Department said on Friday. There were 127,000 more jobs created in November and December than previously reported.
The unemployment rate, however, edged up 0.1 percentage point to 7.9%.

While the headline November payrolls print came in almost on top of expectations at 178K, vs consensus of 180K there were two big surprises in today's report, one being the unemployment rate which plunged from 4.9% to 4.6%, well below the 4.9% expected, but the biggest negative surprise was that the Average hourly earnings in November dropped by 0.1%, far below last month's 0.4% rise, and below the 0.2% expected with the annual increase growing by a far more modest 2.5% than the 2.8% expected.

With the whisper numbers suggesting a modest beat heading into today's October NFP, expected by consensus to print at 173K, moments ago the BLS reported that in October jobs rose by 161K, missing expectations, however in line with historical precedent, the September print of 156K was revised upward to 191K, while the change in employment for August was revised up from +167,000 to +176,000, resulting in combined employment gains in August and September if 44,000 more than previously reported.

On the surface, the December jobs report was good, with 252K jobs added, higher than the 240K expected, leading to a fresh cycle low unemployment rate of 5.6%, down from 5.8% and below the 5.7% expected, and with the November data revised to a whopping 353K from 321K, a net change of 50K including the October revision.

If there was any doubt if the Fed would hike rates in December, it is gone now: October payrolls soared by 271K, smashing not only consensus of 184K, but the highest expected print. This was the highest monthly print since December 2014 when the gain was 329K and pushed the YTD average monthly gain from 199K to 206K. The unemployment rate dropped from 5.1% to 5.0%, the lowest since April 2008, and most importantly, the average hourly earnings rose from 0.2% to 0.4%, the highest hourly earnings jump since 2009!

And so the "most important payrolls number" at least until the October FOMC meeting when the Fed will once again do nothing because suddenly the US is staring recession in the face, is in the history books, and as previewed earlier today, at 142K it was a total disaster, 60K below the consensus and below the lowest estimate. Just as bad, the August print was also revised far lower from 173K to 136K.

For once the ADP was actually spot on: in June the US economy added 288K nonfarm payrolls, far above the 215K expected, and above the upward revised 224K from June. Further, May jobs were revised from 282K to 204K. This was the fifth consecutive month of job gains over 200K. The unemployment rate tumbled to 6.1%, well below the 6.3% expected. The brth/death adjustment added 121K jobs, compared to 205K previously, and a total of 452K so far in 2014.

So much for all the fire and brimstone associated with the government shutdown. October nonfarm payrolls soar +204,000, nearly double the 120,000 expected. Unemployment rate at 7.3%, up from 7.2%. And just like that, the "Taper talk" is back... From the report:

The Bureau of Labor Statistics:
￼Transmission of material in this release is embargoed until 8:30 a.m. (EDT) Friday, June 7, 2013
￼Total nonfarm payroll employment increased by 175,000 in May, and the unemployment rate was essentially unchanged at 7.6 percent….